You're watching...
Granite Investment Advisors CIO Scott Schermerhorn and Spectrum Management Group Managing Partner Bob Phillips debate the outlook for the markets.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Up Phillips right now to talk about kind of where we are at the markets overall and Bob I wanted to ask you this because obviously as we look at.
How we're feeling about the markets right now whether or not it's a good buying opportunity we are saying a nice rally frankly I'm -- -- -- higher filling overall about the markets and Bobbitt you think.
That we are in for some type of correction.
Yeah I think that this is -- this rally is a great place to be taken some protection -- -- solemn to some of these higher prices.
The fundamentals being a hard time finding anything to be positive about and if you -- retail sales were down treatments that are oh April through June.
A slightly.
Up a little bit in July but not much.
And the last thing that's happened 49 times since 194727.
Those point nine times we're we were in a recession three months later.
Then you look at the mark at the market we've just been ended earnings season or are close to doing that.
And how perhaps the companies didn't hit their sales estimates or didn't beat them.
-- -- weakest showing since 2008 and prior to that go back to 2001.
And then I can talk about the S&P earnings estimates and our expectations -- will be brought down.
So the markets much more expensive than people think it is.
Well I'm in the US some very very special let's bring in a ball Scott -- are -- actually like the market at these levels how do you counter attack his bearish argument.
What if the first word counterattack it was let's be realistic -- market's up 12% -- to -- has been a lot of hemming and -- do you raise cash you don't know bonds should go and cash.
The reality is the stock markets outperformed all those asset classes.
And yes while earning some earnings might -- at risk we're twelve times thirteen times earnings the market historically spend fifteen so I think this some room and there.
And the other thing I think it's important with a lot of companies.
If you look at that now they now have yields greater than a ten year treasury.
And there -- -- have very low payout ratio so I expect good -- increase over time which typically get rewarded by investors.
Don't -- though -- you know I don't go ahead Bob.
Buys -- I agree with most of that but -- time I'm going forward.
So if you look at the S&P 500 earnings.
This this quarter were up 2% above last year's -- and -- -- growth.
Of the third quarter the rest -- be flat over last year.
And I think what's scary is fourth quarter estimated -- to jumped 14% over -- 2011 levels and I.
What's gonna drive that -- is that growth coming from and is not coming from sales apparently.
We're not seeing that so it's all about where we're heading out -- we've been.
-- answer the question where's that gonna come from.
I think the reality economy continues to grow yes of a slow pace but it continues to grow and that's gonna benefit companies that participate and I got names some companies how to we played that.
I I think one way -- great way to pay and play and I think when most undervalued asset class person areas out there's natural gas.
You know here's what you know historically.
It was posted ten to one ratio and oil.
Defendant in the case -- and 95 today natural reaction -- at 915.
But obviously those two -- supply the came out as for what we see happening now demand is increasing as utilities -- using it.
Fleets are starting to use it more.
Chemical companies start to build plants in this country.
And supplies going is decreasing as companies are laying down rigs so longer term we just think it's a very attractive place to be -- supply demand is finally getting -- or not.
Getting back in -- bounce but is moving in the proper way.
I bought -- he's talking about kind of some petroleum names -- going -- one direction you've got a very different.
Investment approach -- what are your topics right now.
There -- -- and we're very defensive and and we think dividend paying stocks or the place to be is boring is that might sound.
Genuine auto parts -- like quite a bit and auto sales have picked up but the age of the of the fleet on the road is still.
I think around eleven years or so so it's -- then I think in in history.
And people have are keeping are preparing their cars -- keeping them longer.
That -- gonna continue to believe and continue on our -- is payment 3% dividend so its not a bad spot to be.
And we like we still like Microsoft.
You know technology company that's not one of the the darlings and it trades at a very good multiple.
And they didn't didn't -- themselves and they keep increasing that dividend so that's the way who had.
So now let's bring UN you're in the trading that there you -- your ear to the ground even talking to other traders on the floor you've been hearing the conversation you'll have a bear calling for -- fifteen to 20% correction in the stock market.
And as someone who sounds pretty bullish where do you fall -- What I look like I said really optimistic so I think we've come a long ways and as a trader looking for a little bit of a pullback and see how this 14100 level holds -- BS and we haven't seen any profit taking we've been up like fifty -- a last sixteen sessions I think in -- -- But the key for me and that people a lot of guys -- watching the bonds bonds are the -- used for volatility instead of fixed many years ago.
Bonds have seen a nine point oh whiny from -- July 25 key reversal money is flowing out of bonds and going back into the market that's can be supported there's a ton of money get -- -- safety.
And it's gonna go somewhere else to get some higher -- -- I still think there's a lot more juice left.
Caught in the stock market.
Alan how every factor do you think that was all this talk about QE3 -- are really -- up because you're saying more more market analysis and commentary come out.
This telling us that QE3 is a big vision it's like a unicorn it's not out -- what -- said.
What does we're seeing we're seeing indirect stimulus by all of the money coming out of treasuries sell.
You know it's it's kind of the action but without the -- if you look at that single defect trend that happening treasuries.
And we'd -- a half a point.
In the yield on the thirty year note so we've had a huge -- exactly -- that -- pulling out of -- to see what happens here.
But that hasn't been a horrible in the economy it's actually been an indicator of of health that rates could go back up on the long end of the curve.
You know I still think you know that there's there's a lot more money -- they -- -- -- -- people feel more -- the retail investor is pretty -- abandoned.
-- a lot of the a lot of the market from this fear and they waited -- bonds.
-- some point they're gonna say listen I can get a better return elsewhere on ticket and out of the safety and I put it somewhere where him to keep -- It's gotta understand you have pretty strong opinion on the treasury market where it's headed.
I ice we've view tracked treasuries right now -- risk as return -- stressed.
I mean to be honest what we have ten year 180 I would loan myself money for one point 8% to ten years PPP.
Well -- you want to respond to that.
Well I think -- If you look at.
Things slowing down -- go back to what was gonna drive our economy was the consumer.
It really talked at all yet today we have -- haven't had to about the fiscal cliff coming up -- all the things that are very well known.
And we're hitting the debt ceiling limits of the things for that can cause disruption of the next 45 months I think -- massive.
That those things do hit actually I think treasury treasuries probably go back down that.
From a three and two and a half and and com you can make money owning the long -- All right anybody anybody want -- last word Scott last word.
The one less one less thing -- a huge huge in the market -- -- the risk that you don't know the really virtue.
The physical -- for European situation these are pretty well known -- I'm Morgan I I would focus -- suppress who don't know though these are pretty well known.
It will -- that -- that I agree that's why it's like should focus on slowdown of sales and.
And -- like in that area and our brick and I don't I don't -- you've got up on the back in the black the last word yeah.
Yeah I just gonna see I agree you know we -- you receipt of series of.
Of higher lows as all of these news events have.
-- last three years I think we're getting your point -- -- can digest this and move forward.
And that's already priced in the market with its fiscal -- talk and -- -- -- nonsense that could happen again you don't trade on collected trade on price action a price actions tell us something else.
-- -- -- -- -- -- --
